Clause 165
Banking Bill
3:15 pm
Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I appreciate the probing nature of the amendment, but it is the Government’s view that it is unnecessary and almost certainly unworkable. I fear that it might have arisen from a misunderstanding of what the proposed new section 221A of the 2000 Act will do and how it will work. I shall explain the Government’s thinking behind it and, if the hon. Gentleman has further questions, I shall be happy to hear them.
The purpose of proposed new section 221A is to allow the compensation scheme to delegate its decisions to a contractor, referred to as the “scheme agent”. The person might be the liquidator appointed under the bank insolvency procedure, another firm of accountants or a suitable firm, but the key point is that the decisions necessary for enabling speedy payouts from the FSCS have to be made quickly, in large numbers and in an automated way. That could not happen if all decisions had to be referred to the FSCS itself, even if all that took place was that the decisions were then ratified by the FSCS computers.
The decision-making process will therefore have to be delegated. Of course, the FSCS will keep the ultimate responsibility for the decisions. The scheme agent will be an agent of the FSCS and carry out functions on its behalf, not an independent decision maker. Rather than appoint a person to perform its functions, proposed new section 221A would simply provide that arrangements may be made with another person to perform any of the FSCS functions. Those arrangements are likely to take the form of a normal contract for services rather than a contract of employment and, if the contractor fails to perform, the FSCS will be able to take action for breach of contract in the normal way through the courts.
I appreciate the probing nature of amendment No. 10, but the mechanism that it proposes is unnecessary and could cut across the normal ways of dealing with breaches of contract in an unhelpful way. I hope that my explanation of proposed new section 221A has been helpful to the hon. Gentleman.